Deciding production quantities is one of the most asked questions when it comes to launching a fashion business. After a couple of seasons, things tend to get easier and this kind of decision comes to you more naturally but, when launching your first season, there are a couple of notes to take into consideration when you are ready to move into production.
Even though this is not rocket science, when you are starting your fashion business, you have to look out for more details than you can imagine. As I have mentioned before (in pretty much all blogs I have written about the fashion industry), fashion is a business and business is about strategy and becoming successful. Launching a successful clothing line, with the correct production numbers and making sure your styles will sell is the first step.
But how to decide production numbers? Let’s look into a few steps to take before deciding production numbers.
1. What are the projected sales?
When working with a marketing agency, they will present you with a sales strategy and the project sales for your first season. This will help answer how many units you need to produce.
2. Where are you producing?
If you have read the blog OFFSHORE VS LOCAL PRODUCTION you would know the difference between these two, but a quick explanation about how these work:
Offshore production: prices are cheaper, but you have to meet their minimums per order.
Local production: allows you to produce smaller quantities, but prices are higher.
This is not rocket science. When we are talking about production, higher quantities decrease the cost and smaller quantities increase production prices. Even if you are producing offshore, smaller quantities will increase prices - which will still be cheaper than the US but, in general, prices will increase when you want to produce smaller quantities.
With that being said, this is the moment to look back at your branding, target market, and cost. Who are your customers and what is the price point they are willing to pay?
Once you know your costing and retail price, you will know if the final price is coherent with what your customers can afford - aka, how many units you need to produce to meet that retail price and have enough stock for your projected sales.
3. Is your marketing budget coherent with the production budget?
Another thing I keep repeating: your investment in marketing needs to be coherent to your investment in production!
If you are willing to put five hundred thousand dollars into production, you need to have a marketing plan that will sell those five hundred thousand dollars and make you profits. Otherwise, you will be sitting in inventory.
So looking back at your budget and the marketing you can afford, is a great way to avoid producing too much (or too little).
4. Where are you selling?
I have written a blog about wholesale and direct-to-customer sales. If you have read INSIDE THE FASHION INDUSTRY - Sales Plan you would understand why it is so important to add this profit margin to your business. But this is important not only because of the profit margin, but because this will also help you determine how many units you have to produce.
When doing wholesale you are the boss and not the stores or boutiques you are working with. Yes, they are your clients and yes they will do everything they can to negotiate with you, but the truth is: when you are doing wholesale, you are the one telling stores your minimum quantity per order and the wholesale prices.
So, if you are closing a deal with a wholesale store, you will negotiate a minimum order with them. This order will tell you the number of units that need to be produced only for that store. In that way, you can look back to your sales plan, check the projected sales directly to the customer, and how many extra units you have to produce to meet the wholesale orders.
This is a lot of information and details to pay attention to. I know! But believe me, all of these details are important when it comes to choosing the right production quantities. After all, your goal is to make sales so you can reinvest in your next season.
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